In advance of a forthcoming industry-backed bill to legalize high-cost, long-term payday loans in Pennsylvania, the Philadelphia City Council took the first step toward fending off their attempts by passing a resolution today, calling on members of the General Assembly to oppose any such legislation.

Members of the Coalition to Stop Payday Loans in Pennsylvania testified in favor of the resolution, applauding Philadelphia City Council for standing up for our most vulnerable, and thanking Councilwoman Cherelle L. Parker for her leadership on this issue.

The full press release is available below. Video available at this link.

The payday lenders are back in Harrisburg, lobbying legislators to weaken our state law. Just as in prior sessions, they claim their legislation would create a responsible credit product, but at the core of their business model and their proposal is a debt-trap loan. This year, the payday lenders have a new strategy: they are using the federal Consumer Financial Protection Bureau (CFPB) as a Trojan horse to bring their predatory loans into Pennsylvania.

A memorandum (link is external) is being circulated in the Pennsylvania Senate to garner support for legislation to legalize a new loan product in Pennsylvania, called the “Pennsylvania Financial Services Credit Ladder.” The memo cites CFPB proposals as a model for the legislation, but fails to mention that, unlike Pennsylvania, the CFPB cannot set a limit on the cost of credit. Changing our state law by adopting the CFPB proposals in Pennsylvania will legalize high-cost payday loans.

The CFPB is working to combat the worst payday lending abuses nationwide, but it has one hand tied behind its back because it does not have the authority to issue a rate cap on interest and fees, the most effective way to curtail predatory lending. The CFPB has released a working draft of proposals it is considering for a forthcoming national rule. While the preliminary proposals have some strong provisions, they also contain loopholes that would allow payday lenders to continue making unaffordable, predatory loans in states where they are legal. The rule remains in development, and the CFPB should craft regulations that are broad and strong enough to put an end to debt-trap lending across the country.

Importantly, the national CFPB rule would not preempt or supersede Pennsylvania’s stronger state interest rate cap. Unless the payday lenders convince state legislators to use the CFPB rule as cover for significantly increasing the costs of credit in our state, our critical protection against predatory lending will remain.

Replacing Pennsylvania’s rate cap with the CFPB proposal would weaken our state law. That’s why the payday lenders, who oppose the CFPB rulemaking at the national level, appear to be supporting its implementation in Pennsylvania. State legislators should reject the payday lenders’ Trojan horse.

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For any questions or comments about the coalition working to keep predatory payday loans out of Pennsylvania, please contact us here.This website is paid for by Community Legal Services, Inc. on behalf of its low-income clients,1424 Chestnut St. Philadelphia, PA 19102.